SME Management: An Overview

Session 1: SME Management

What is a company?

• An enterprise refers to any entity exercising an economic activity, irrespective of its legal structure.
• The economic activity includes selling products or services at a given price in a given market.

Difficulties of SMEs vs. Large Companies

• SMEs are often more flexible and agile, but have fewer financial and human resources than large companies.

Role of SMEs and ETI in the Economy

• SMEs are considered the backbone of the European economy and create over 85% of new jobs.
• SMEs play a key role in economic development, especially in Europe.

The SME Manager

• A SME managers must be versatile, who is capable of managing multiple aspects of the business.

Company Classification Criteria

• Microenterprises/VSE: Fewer than 10 employees with turnover or balance sheet < €2 million.
• SMEs: Fewer than 250 employees with turnover ≤ €50 million or balance sheet ≤ €43 million.
• Mid-sized enterprises(ETI): Fewer than 5,000 employees with turnover ≤ €1.5 billion or balance sheet ≤ €2 billion.
• Large companies: Not classified in the above categories.

SMEs the European Commission definitions

• Small businesses: Fewer than 50 employees, turnover ≤ €10 million, or balance sheet ≤ €10 million.
• Medium-sized enterprises: Fewer than 250 employees, turnover ≤ €50 million, or balance sheet ≤ €43 million.

Introduction to SME and Mid-Sized Enterprise(ETI) Management - SME and ETI Definitions

• The mid-sized enterprise category (ETI) was established in 2008 through the Economic Modernization Act.
• This category serves as an intermediate status between SMEs and large companies.
• ETIs are between SMEs and large companies where they employ between 250 to 5,000 employees.
• Annual turnover is equal to or less than €1.5 billion, or the balance sheet total does not exceed €2 billion.
• These companies maintain significant flexibility in their management, despite their relatively large size.
• An enterprise with fewer than 250 employees but with a turnover of more than €50 million and a balance sheet total of more than €43 million is considered what is a ETI.
• To qualify as an SME or ETI, a company must satisfy the employee count criteria; it can choose to comply with either the turnover or balance sheet threshold.
• The size of the company is not the only important factor when determining SME membership; access to significant additional resources may disqualify a company from SME status.

Session 1: Characteristics of SMEs and Mid-Sized Entreprises

• SMEs are distinguished from large companies by several key characteristics that influence their management and operation.
• Characteristics of SMEs, those are: Flexibility and responsiveness, closeness to clients & partners, easy management structure, limited resources, business culture and innovation capacity.
• SMEs are generally more flexible and can adapt quickly to changes; decision-making processes are often shorter, allowing for greater responsiveness.
• SMEs benefit from closer relationships with clients and partners, enabling better service and product customization.
• The satisfaction and strong relationships of SMEs with their stakeholders becomes competitive advantage.
• SME management is often centralized around one leader or a small team, which leads to a flatter hierarchy and more varied responsibilities for employees.
• SMEs often have more restricted access to funding compared to large companies and depends on local banks, public funding and participative funding.
• A lack of financial resources can hinder their ability to invest in innovation, technologies, and internationalization.
• SMEs are often characterized by a strong company culture close to the leader, creating a more personalized and familial work environment.
• Employees in SMEs can benefit from a more informal environment with direct and transparent communication.
• SMEs are often drivers of innovation because their small size and flexibility allow them to innovate more rapidly than larger companies.
• They benefit a lot from their proximity with clients and market to identify and answer specifics needs more adequately.
• ETIs possess characteristics of both SMEs and large companies.

Session 1: Characteristics of Mid-Sized Entreprises

• ETIs have a critical size that allows them some advantages of large companies, while remaining flexible but also has the means necessary to adopt a strategic approach in HR, finance and tech.
• Many ETIs seek international development to find new markets and are suited to adapt to the demand of foreign markets.
• ETIs are often be able to invest more than SMEs in long term innovation thanks to greater financial resource with dedicated departments towards research and development.
• Contrary to SMEs, ETIs have a higher ability to find external funding to finance growth, digital transformation and expansion at international level.
• ETIs have more formalized and sophisticated structures than SMEs like and Admin board, direction committee, specialized functional departments that allows systematic approach in governance and performance management.

1. Role of SMEs in the French and European Economy

• In 2021, France had 159,000 SMEs employing 4.3 million and generating 23% of the added value of businesses.
• In 2023, the EU had 25.8 million SMEs employing around 100 million people, representing 99.8% of EU businesses, creating about two out of three jobs.

2. Role of ETIs in the French Economy

• In 2020, France had 5,400 ETIs, with 1,000 being industrial, which Employ around 3 million, and generating 30% of national revenues.
• A significant proportion of ETI revenue comes from exports (34%).
• ETIs heavily invest in R&D (23% of private R&D spending) and private investment (30%).

3. National Strategy for ETIs

• Launched in January 2020, this strategy promotes the role of ETIs in the economy supporting their development.
• The strategy involves six areas: recognition, management support, skills improvement, investments, and transmission of ETIs.

4. Second Phase of the National ETI Strategy (2022)

• This phase focuses on the energy and ecological transition of ETIs, access to skills, and competitiveness improvement within the framework of France 2030.

5. The Role of the SME/ETI Manager

• The manager plays a central role in strategy, human resources, and financial management.
• Important values for a Manager: clear vision, anticipate the future, and embody your own company values.
• The manager is also involved in risk management, innovation, and client and partner relations.

6. Responsibilities of the Manager

• Human resource management: recruitment, retention, training, and performance management.
• Financial management: monitoring cash flow, investment management, relations with banks.
• Client and partner relations: network development and business negotiations.
• Innovation and adaptation: stimulating innovation and adopting new technologies.
• Risk management: management of financial, legal, and reputation risks.
• Business culture and leadership: create a strong culture and maintain effective internal communication.

7. Corporate Social Responsibility and Sustainable Development

• Managers integrate issues related to corporate social responsibility (CSR) and sustainable development, by adopting responsible business practices.

Qualities of a Good Manager

• Although there is no specific profile for a good manager, here are qualities that are often vital: Personality, energy, vital for facing multiple aggressions on a daily basis.
• The most important qualities are: Awareness of responsibilities, visionary spirit and openness about the world, common sense and rigor.
• Further managers require: Imagination and curiosity, the art of seduction and humor, the ability to listen and understand psychology, enthusiasm and the art of animation.
• Self-control is key in every circumstance combined by a capacity for adapting depending on unforeseeable events, passion for the company.

Essential Company Functions' Mastery

• Although managers don't master every field, they are in charge of essential data so that they can make decisions on a clear case-by-case basis.
• Leaders tend to focus on a specific domain of the company depending, it could be commercial, technical and so on as long as some keep focusing on CSR.

Here is a simplified list of a main company’s functions and points on whom minimum awareness and knwoledge will be expected

• Regarding HR: structure, definition of work, HR potential, required skills, remuneration.
• Commercial: product performance, client information, market competition, the tech team must organize to focus on investment, manufacturing standard, quality control, under-contracting.
• Regarding finance: understand the rotation of funds, result forecasting, management control thanks to table of balance.

Important notes on companies

• Business leader must be able to delegate the powers to his team to ensure training, communication which important operation tools to follow.
• Business owners must lean on external advice.

Permanent Diagnostic on strengths and weaknesses

• Business owners must start this study on key business functions.
• Several options available like, SWOT for each of the internal and external factors.

Session 2 and 3 : Objectives and issues in a company’s strategy

• Long term vision definition, Maintaining business sustainability, optimize value creation value to build sustainable advantages.

Strategic approach

• Strategic, operational formulation as action plan with necessary means.

Important element to draw a strategy

• Company trade as in skills and business segments to allow competitive advantages for innovation or costs.
• Key steps on formulating
• Analyze external environment via PESTEL to consider the legislation, or five P factors regarding competition.
• It’s important to pick a plan and stick to it and pick a strategy based on cost, segments.

Why is strategy so important today

• Globalization, tech innovation allows change and risk management at all times.

Strategy to tailor with SMEs:

• focus on client and on their personal value is the key innovation segment allows strong competitiveness

From global strategy to local

• adapt visions at each level, but keep the coherence with general vision.

Strategical support plan and management

• must be strong communication in key functions so that everyone sticks to the path.
• Regarding what to expect: marketing for market’s expectations, R-D on innovative ideas, HR mobilization, finance and management for business operations.

Keys implementation

• action to implement and allocated resources for it is important.

Control

• clear goals, implementation process analysis and follow up to fix where necessary..

Dynamic Management

• Strategic must includes all these elements to allow proper decision and reflexions.

Formulation and strategical deployment

• With operational management and all management tools.

Growth management : Challenges and solutions

• key challenge for every business is to strengthen its market.
• It demands organization and equity with a right implementation to allow structure of growth.

Types of growth

• Internal for product engineering, more capacity for production, must be controled and adapt to business culture.
• External with partner business to help reaching markets for synergies but can happen with important costs.

Main obstacles to Growth

• Financial obstacle, bad HR resource allocation, bad management.
• External: competition, regulations economics change and more.

Solutions

• tech innovation, structure plan with strong tools for success.

Session 2 : Management & Planification

• Strategizing is more efficient if done with a set action and communication plan with focus on main functions such as : ressources, skills in conception, transversal skills.

Management

• The managerial role is in the front in the company so they have constant communication to reach maximum performance and innovation.

Stragety Deployment

• Planification with detailed steps and indicators, clear HR ressources with great work ethics

Action plan phases :

• Set precise and measurable means, analyse with indicators, correct when needs be.

Economic dynamics :

• to adapt at any moment by drawing plans.

The Strategic Process

• The strategic cycle is continuous
• Analysing
• Thinking
• Acting
• Deciding
• Balancing

What drives strategic thought:

• A solid 4 components: vision, optional plans in place, measure risk and measuring the risks if you change what you do.

Internationalization: Strategy

• It is essential for your company’s communication & engagement which can be achieved through, Informing teams and involved parties, by integrating them with the plans, encouraging innovation, and recognizing employee input.

Internationalization

• Must have a business plan , and be adaptive and structured.

International challenges

• Some of The most common include economical, political, technological and Legal, you must also evaluate any risks and take action to mitigate.

Session 4

Key indicators that can guide you:

• What’s your workforce’s commitment? What actions if any exist to promote progress? There should be external and transparent communication.

What should you plan for?

• A change of CEO requires planning to make transition easier because CEO’s power can determine how the business operates.

Management and teams in PME ETI

• Leaders’ role must include charisma and motivation to reach objectives.
• What must managers bring to the table? Better work environnement and better productivy to get talent on board with fidelity.

What drives action better?

• Herzberg motivation model, Maslow top needs, there are ways to adapt work settings to your employee for fidelity and productivity.

Employee Engagement and Motivation

• The strategy for motivating employees is by; recognizing and valuing their contribution, taking their feedback seriously, promote a positive work-life balance and invest in training.

Talent and Skills Management

• Key to competition and business sustainaibility.

Career management

• Plan in advance, encourage internal work transition, mentoring

How do you retain talent in SME and ETI?

• By focusing on: competivity, business cohesion, reducing costs, retain and attract talent.

What talent management is most important to SMEs

• It can be tough due to low wages, few new work functions, or external competition.

Succession of a company

• a lot of SMEs dont plan its succession, there is need of a 360 plan.

the business functions

• evaluation and titles.

What factors contribute to a successful transfer?

• Be sure your desire is to transfer, be aware of its true value, and make realistic decision based on clear steps.

Key evaluation steps:

• market approach, revenu approach patrimonial approach.

Familial transmission

• must understand the transmission can be costly.

After you cease the business

• you should expect engagements.

Session 5: Financial and Risk Management ETI and SME

• Annulal accounts show all flux and operations to give the global vision.
• This important for: direction and managers, stakeholders and for overall success,.

Support documents:

• Ledger, Journal, various accounting tools.

Accouting revision

• key to follow all data to prevent incidents.

Main function:

• check with all other functions to reduce impacts, prepare for short or long term investment.
• Keep the big picture over time..

Piloting function :

• must allow control easy to understand for quick decisions which needs an good quality.

Piloting Tool :

• easy to implement and requires data treatment which all must coherent so that the company evolve with time it adapts on all levels.

How to put in place such measures?

• Understand what is the real goal and indicators, then set up all structure to implement these processes in the direction you want.

Sector Indicators:

• automobile, hotel.

Risk managmen:

• ERM must take into account all internal stakeholders, must plan accordingly to reach the desired business balance.

Manager importance

• key if fully involved in data processing for key success.

To take ERM and control the action :

• have great knowledge and internal data for decision

ERM should take into plan

• 3 steps with all actors to make it reliable and useful.

Reporting importance :

• use tools to transmit all data in short amount of time, easy to understand for strategic vision in a new risk view: must see as a tool to create value.

RSE and evolution :

• 3 phases for a sustainable evolution which are environmental, societal and economic.
• Must lean on specific norms.

CSRD directive is europe’s aim

• for public and private company , to follow how well can companies integrate CSR.

RSE impact SME and ETI

• The biggest part is from building, transportation so all those areas must be taken into account to have reliable evolution, it must be a team operation so that to have a team for pilotage to implement the RSE.

Success with RSE:

• use recognized systems like EMAS.

How does a SME implement RSE?

• Appoint a RSE leader, do a diagnostic, and set up a plan (with team action and objectives).
• All those steps includes a RSE aspect to drive a project for the best.